Hyundai: Charging ahead with growth and investment

Hyundai Motor America and its dealers, like the rest of the industry, spent much of last year recovering from the inventory shortage that spun out of the pandemic.

With supply constraints now solidly in the rearview mirror, Hyundai can focus on strengthening its position in the marketplace.

"If I had to describe Hyundai right now in two words, it would be growth and investment," said Kevin Reilly, 54, owner of Alexandria Hyundai in Virginia and chairman of the Hyundai National Dealer Council, who finished his term at the end of the year on a high note.

"My father was one of the first 15 Hyundai dealers in the nation, and I sold my first Hyundai in 1987 — a Hyundai Excel. I've seen the evolution of the franchise over the years, and right now we're in a period of substantial year-over-year growth," Reilly said.

Hyundai closed 2023 up 11 percent with sales of 801,195; its previous record was 768,057 in 2016. It was the third year in a row of record retail sales, and December marked the brand's 17th consecutive month of year-over-year sales growth.

"Across every aspect, I see the massive investments that are being made at every level, and it's all in lockstep between the dealer and the manufacturer," Reilly said.

October was the one-year anniversary of parent Hyundai Motor Group breaking ground for the Metaplant, a massive electric vehicle and battery plant outside of Savannah, Ga., that it expects to bring online ahead of schedule in the third quarter of this year.

The Metaplant will build six models across the group's Hyundai, Genesis and Kia brands with the capacity to churn out 300,000 EVs per year.

Meanwhile the dealers are rapidly upgrading their facilities to create modern storefronts and help to build out the charging infrastructure to support Hyundai's three EVs — the Kona Electric, Ioniq 5 and Ioniq 6 — plus the ones it plans to sell, including the upcoming Ioniq 7 three-row crossover.

Between the products and the investments, Reilly — whose dealership is in a hot electric vehicle market two miles outside of Washington, D.C. — said Hyundai is laying the foundation for a tremendous future of leadership in the EV space.

He spoke with Staff Reporter Carly Schaffner about new products on the horizon, EVs and the future of auto retailing. Here are edited excerpts.

Q: What are your biggest takeaways from last year?

A: Coming from a person who's been with the franchise for such a long period of time, it's exciting to see such substantial growth. We had a tremendous year in 2021, and we came back in 2022 and did it again. And there was even more growth in 2023.

It's extremely encouraging and exciting for the dealer body, and that's why in the NADA dealer attitude survey, Hyundai ranks in the top 10 in terms of things like product and the future of the franchise. Dealers are confident because they see the growth. And because they see the investments Hyundai is making, they too are making massive investments at the dealership level.

2023 was a record year for Hyundai. What were the contributing factors?

It starts with Jose Muñoz and clarity of vision he had in terms of getting resources to North America and specifically the United States. When I started on the national dealer council, Hyundai was probably 35 percent [crossover] and 65 percent sedans, and now it's completely flipped and then some. Jose recognized the consumer demand and he got everything in place extremely quick. When you look at our top sellers — Tucson, Santa Fe, Kona, Elantra — those four vehicle lines alone represent about 70 percent of our sales. So, we have the right products in the right segments and for us as a dealer body, we're able to deliver what the customer is looking for. And the product from the styling and content perspective is incredible.

What do you think will be the big topics at the NADA Show among Hyundai dealers?

Hyundai will be sharing the strategy in terms of what the next step is as we continue to introduce new and updated products. I think they'll also update the dealers on the progress of the Metaplant, when it will open and how we'll continue to grow our share in the EV market. I think we'll talk a little bit about Ioniq 7, how we're going to position that vehicle alongside the Palisade.

What is the most anticipated product launch for 2024?

Santa Fe, absolutely. It's been such a great product and mainstay of our brand. Tucson [crested] 200,000 sales [last year], and Santa Fe was over 131,000. What makes it even more exciting is what the new Santa Fe looks like because it's a complete departure from the previous iteration. They designed it from the rear to the front and it has a massive liftgate and you can basically camp back there. That car is so versatile and there are so many different consumer segments that we can sell into so there's a tremendous growth opportunity there.

Is there anything missing in the lineup?

We've got the whole gamut covered, and Ioniq 7 is going to round it out nicely because we'll have a family-mover vehicle in an EV. As it relates to EVs, I'm in a very progressive area just outside of Washington, D.C., and that car will do extremely well for families who want an EV but still need the room to manage the family and their daily needs.

What has been the general sentiment among dealers about the Hyundai-Amazon partnership announced in November?

There's excitement about the opportunity to partner with one of the largest online retailers in the world. Obviously Amazon's reach is unparalleled, and as a dealer, having access to that network is tremendous. We were already in what I would call a "phase one" relationship with them where we listed our inventory online, and that went well. Now we're taking the natural next step to [find out] the things to make that user experience better for the Amazon consumer. The pilot dealers will be totally going through testing in Q1 and learning more about the process.

Is your dealership part of the pilot program?

No, I'm not part of part of pilot program. From my understanding the Washington, D.C., area wasn't one of the cities selected to be part of it.

Did you find success finding customers through the existing Amazon forum?

I would say yes. If we have the inventory they're looking for, we're able to establish that conversation with them. There're a lot of things that go into an automotive transaction — trading, financing, different protection products, the state taxes, right down to municipalities and the differences there — so there'll be a lot of things to learn in the pilot program.

Is the omnichannel approach the future of auto retailing?

Certainly we were talking about the need to have an omnichannel type experience before the pandemic, and we intuitively knew that we needed to make this process easy for our customers and [asked] how do we leverage technology to do that? During the pandemic [digital retails solutions] were very important and are still. So the omnichannel is part of the evolution that has been happening for quite some time.

Are you still seeing a healthy interest in Hyundai's EVs?

Yes, there is still healthy demand for EVs. Being next to D.C., we're in a very EV-centric market, so if the average [EV sales mix] in the marketplace is 7.5 to 8 percent, my dealership generally runs between 20 and 25 percent with Ioniq 5 being the No. 1 seller of the EV offerings that we have.

Your dealership is in an EV hotspot, but what about the U.S. in general? Do you see adoption slowing?

You're going to have that spike up, and it can't stay on that slope forever, but it's going to be still a rapid adoption. Aside from the sustainability benefits and everything of that nature, it's just a much better driving experience. Once a customer gets in an EV and starts driving it, there's almost no chance they'll go back to an ICE vehicle. Once they make that change, it's for a lifetime because the drive is better, and the ergonomics inside are better because you can do so much with the interior of the vehicle. There are just so many benefits to driving an EV.

Other than getting them behind the wheel, what else can be done to make consumers more comfortable switching to electric?

Obviously one of the greatest barriers to EV adoption is access to high-speed charging. When I started laying the groundwork for the Hyundai [Accelerate] facility project, I established a partnership with Electrify America to get four high-speed chargers installed for public use in addition to the Charge Point chargers I have for internal use. So now we have these ultra-fast Electrify America chargers to serve the community, and even if they don't own a Hyundai, they know they can charge up at my dealership. And both my Genesis and Hyundai customers get two years of free charging with Electrify America. So we're very much part of the solution as it relates to EV adoption.

That is really going above and beyond. Have other Hyundai dealers followed suit?

It took about two years to put in place, and we just had the ribbon cutting on the Electrify America chargers a few weeks ago. I think it's something that the dealers will learn about, and I'm hopeful Hyundai will communicate because it serves our communities well when we're part of the infrastructure solution.

Hyundai has a wide array of electrified offerings. Are plug-in electric hybrid vehicles a viable solution for consumers who don't want to commit to full electric?

Part of what's available to customers is going to be driven by the state. In Virginia, Hyundai doesn't distribute PHEVs to us because we're not a ZEV state — although Virginia has enacted legislation and will soon be. But putting that aside, just my opinion, I tend to be of a mindset that hybrid is the bridge vehicle. My personal experience with customers that aren't ready to go to full electric, and they consider hybrid vehicle vs. fully electric vs. plug-in hybrid, they tend to go with a hybrid.

What has it been like for dealers or you to talk to consumers about Hyundai's loss of the federal EV tax credit because of the stringent battery sourcing and assembly limitations?

With respect to EVs, that particular customer is educated on the segment and really leans into understanding the technology, what the car is all about and what is driving them to purchase it. What we see is lease penetration rates exceeding 50 percent in many months because that's how the customers can avail themselves of the $7,500, and they are very well educated about how to best take advantage of the credit. But putting the tax credit aside, at least in D.C., EV customers are more apt to lease because they know the technology is changing rapidly, and they'll be able to take advantage of those changes.

What is Hyundai saying or predicting for vehicle margins on new and used vehicles for 2024? Has there been any restructuring?

We're going now to essentially more of what I would call a normal market as it relates to margin. As supply catches up to demand, it will certainly have the effect on margins. Turn rates are still good, but not across the board like it was during the pandemic. If you look at Elantra hybrid, it's in the single digits. Hyundai is trying to look at ways to streamline it for the dealer and to reduce complexity and give the dealer a firm grasp of what the margin structure is and how they best position that to run their business.